Economics Production, Perfect Competition, Pure Monopoly, Oligopoly

Increasing Marginal Returns

A characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that of the previous resource.

Diminishing Marginal Returns

A characteristic of production whereby the marginal product of the next unit of variable resource utilized is less than that of the previous variable resource.

zero

A company can break even and meet operating costs without a loss when it earns __________________ economic profit

oligiopoly

A market structure characterized by a few large producers, or either standardized or differentiated products, operating in industries with extensive barriers. These producers are price makers and behave strategically when making decisions related to the features, prices, and advertising of their products.

fixed

A perfectly competitive firm will incur its total ____________________ cost of production when it shuts down temporarily in the short run

marginal revenue equals marginal cost

A profit maximizing form should produce a level of output where:

mutual interdependence

A situation in which a change in strategy followed by one producer will likely affect the sales, profits, and behavior of another product.

Collusion

A situation in which decision makers coordinate their actions to achieve a desired outcome. Collusion is generally used to achieve an outcome that would not be possible in the absence of coordinated actions, and it is typically associated with legal or anti competitive behaviors

decrease

As the market prices decreases, all else held constant, a profit-maximizing firm can _______________ its production.

amount of revenue per unit of a product sold

Average revenue is the:

patents, control of resources needed to produce output, pricing strategies, significant cost of capital, economies of scale that may allow only a small number of firms to operate in a market

Barriers present in oligopolisitc markets:

differentiated, price

Because the products of monopolistically competitive firms are ________________________ from other companies in their industry, these firms are able to have some control over the _____________ of their products.

Variable Costs

Costs that change with the amount of output produced, increasing as production increases and decreasing as production decreases.

output

Costs that do not change with the amount of _______________ produced are fixed cost

total revenue minus economic costs

Economic profit equals

the marginal revenue, the marginal cost

In making a decision about how much output it should produce to maximize its profits, which two pieces of information does a firm need.

The extra benefit of producing an additional unit of output; the extra cost associated with producing an additional unit of output

In making a decision about how much output it should produce to maximize its profits, which two pieces of information does a firm need?

Explicit Costs

Monetary payments made by individuals, forms, and governments for the use of land, labor, capital, and entrepreneurial ability owned by others. Also known as accounting costs

not the same market structure

Monopolistic competition and monopoly are:

market inefficiencies

One of the roles of a government is to limit the market power of monopolies or even to eliminate them entirely due to:

economic profits

Positive _____________ profits encourage more firms to enter the market to produce goods and services

normal profits and even losses in the short run

Producers operating in oligopolistic markets generate:

equals

Profit maximization implies that perfectly competitive firms should expand production up to the point where marginal revenue _____________ marginal cost.

marginal product

The additional output produced as a result of utilizing one or more unit of available resource

average

The amount of revenue produced per unit of an output sold is the _______________ revenue.

marginal cost

The cost associated with an additional unit of output is called ________________.

Economic Costs

The cost associated with the use of resources; the sum of explicit and implicit costs

Normal Profit

The level of profit that occurs when total revenue is equal to total cost.

implicit costs

The opportunity cost of using owned resources are

perfect price discrimination, personal pricing, first-degree price discrimination

The pure monopoly extracts all surplus from consumers, yielding higher profits than any other pricing method when it employs....

law of diminishing marginal returns

The shape of the marginal cost curve is depended on the

product differentiation

The strategy of distinguishing one firm's product from the competent product of other firm.

Total Cost

The sum of fixed and variable costs of production

short run

The time period in which at least one input of production is fixed but other inputs can be charged

total product

The total amount of output produced with a given amount of resources is known as the ___________________.

average total cost

The total cost per unit is equal to:

Average Variable Cost

The total variable cost divided by the amount of output produced; variable cost per unit.

monopolistic competition

a market structure characterized by a large number of sellers producing differentiated products, for which they have some control over the price they charge, in a market with relatively easy market entry and exit is known as

entering; exiting

a perfectly competitive market is characterized by a large number of sellers producing a standardized product and taking the market price as given, with easy _________________ and ________________ into the market

monopoly

a pure _____________ is the only seller in a market

cost, revenue

all firms maximize products by producing the quantity of output at which the marginal _________ is equal to the marginal ________________

are designed to prevent firms from engaging in behaviors that would lessen competition

anti trust laws

differentiated, demand

because the products of monopolistically competative firms are ____________________ from other companies in their industry, the _______________ curve they face is downward sloping.

a pure monopoly

by charging consumers the highest price they are willing and able to pay, ______________________ extractors all surplus from consumers, yielding higher profits than any other pricing method available to the firm

marginal revenue

extra or additional revenue associated with the production of an additional unit of output is the

takers

firms that accept the market price and have no ability to influence that price are known as price __________________

the practice of charging the maximum possible price for each unit which enable the firm to capture maximum consumer surplus for itself, the practice of charging every consumer the price that she is willing and able to pay for something.

first degree price discrimination is

monopolistically

for __________________________ competitive firms, branding is important because many consumers do not like taking risks.

the monopoly had to lower the price on all units to sell more

for a monopoly, the marginal revenue is below the demand curve because

additional revenue associated with the sale of an additional unit of output

marginal revenue is the

a market with barriers to entry, a single seller, a good or service for which there are no close substitutes, a firm having significant price control

monopolies are characterized by

combine characteristics of competitive markets and pure monopolies

monopolistically competitive markets:

personal pricing, perfect price discrimination, first degree price discrimination

the practice of charging each and every consumer the price that she is willing and able to pay for a good or service describes

total revenue

the price of goods times the number of units sold gives us

a single firm, no real barriers of entry

what are the characteristics of a contestable firm

demand curve

when a pure monopoly practices first degree price discrimination, the ___________________________ becomes the marginal revenue curve

average fixed cost

The vertical distance between the average variable cost and the average total cost curves is equal to the

average fixed cost

Total fixed cost divided by the amount of output produced is equal to

average product

Total product divided by the number of units of a resource employed gives the ____________________ of the resource.

(average revenue minus average total cost) x output

Total profit equals

Accounting profit

Total revenue minus explicit costs of production

economic profit

Total revenue minus the explicit and implicit costs of production is

Large number of buyers and sellers, producers who are price takers, standardized product, easy entry and exit

What are the four characteristics of a perfectly competitive market?

the demand curve becomes the marginal revenue curve

When a pure monopoly practices first-degree price discrimination

the firm faces a lost

When the total revenue earned by a firm is less than total cost of production

negative

_________________ economic profits encourage firms to exit the market

normal profit

_________________ is also known as zero economic profit

normal profit

__________________ is also known as zero economic profit

price discrimination

__________________is the practice of selling the same good or service to different consumers a different prices

monopoly

for a profit-maximizing level of output, the price charged by a __________________ is not just different but greater than marginal revenue

branding

for monopolitically competitive firms, ________________ their products is important because many consumers do not like taking risks, and this why they can learn about their products before buying them

decrease

if a monopoly wants to sell more units, it must __________ the price for every unit it sells

availability of close substitutes

in a monopolistic competitive market, what consumer would be more responsive to price change?

identical

in a perfectly competitive market, we assume products are _______________ in the minds of consumers

producers may or may not even earn a profit

in an oligopoly

revenue; cost

profit equals total _____________ minus total _________________.

block pricing

second-degree price discrimination is also known as

average product

the amount of output produced per unit of resource employed is the

oligopolstic

the behavior followed by ________________________ firms needs to be strategic, given that they face other competitors in the market

market price

the demand for a perfectly competitive firm's product is a horizontal line originating at the _____________________

marginal revenue

the extra or additional revenue associated with the production of an additional unit of output

price discrimination

the practice of selling the same good or service to different consumers at different prices is called

true

there are important exceptions in which monopolies are actually encouraged to incentive positive outcomes

average revenue

total revenue divided by the number of units of a product sold is the _________________________.

marginal, average

when the _______________ cost is above the ______________ cost, the average cost should be increasing

marginal product

when the __________________ increases, the marginal cost of production declines